Is Silver Primed for a Rally?

Over the course of the last year and a half, silver has been as high as $49.82 an ounce and as low as $26.11 per ounce. The low is more prominent right now as the price of silver has been declining over the last five months and the low was hit just a few weeks ago.

The funny thing about silver hitting $26.11 is that two previous lows in the last year and half were at $26.15—once in December 2011 and once in September 2011. Back in January 2011, silver reached a low of $26.30 an ounce.

As you can see, the $26.11-to-$26.30-range has been solid support for silver over the last few years.

Something that is very different this time around is the sentiment toward silver. As of last week, large speculators were net long 6,222 contracts.
To find a time when large speculators were long fewer contracts than the present position, I had to go all the way back to April 2003 which is also the last time large speculators were net short on silver.

To put things into perspective, silver was trading under $5 an ounce in April 2003. By 2006, silver had tripled to $15 an ounce.

Are we looking at a long-term buying opportunity in silver? I don’t know if we will see silver triple in the next few years, but based on the support in the $26 range and the current doubt toward it, I certainly look for silver to rally sharply.